What Should I Do If I Can’t Pay My Mortgage?

There are a lot of reasons why you might find yourself unable to pay your mortgage. You may have negotiated bad terms for your loan, you may encounter financial hardships, or you may be living beyond your means. The important thing is to take steps as soon as you can to mitigate the damage as quickly as possible. There are several options you can explore if you can’t pay your mortgage.

Refinance

Depending on how long you’ve been paying on your current mortgage, your credit, and a few other factors, you may be in a position to refinance your current mortgage and come out with a smaller payment and lower interest. In order to take advantage of this option, though, you need to act immediately. Once you get behind on payments, you may lose the option to refinance.

Loan Modification

A loan modification is essentially a loan negotiation. You try to change the terms of your current loan. This is different from refinancing because refinancing is getting a new loan, while a loan modification is simply changing the loan you have so that it better suits your needs. It can reduce your monthly payment to an amount you can afford, often by extending the number of years on your loan, reducing your interest rate, or forbearing or reducing your principal balance.

Repayment Plan

A repayment plan allows you to pay your missed mortgage payments over time. For example, if you missed one payment, your lender may split it into thirds and add a third onto the total due for each of your next three mortgage payments. This can be a very good option if you missed a payment because you were unemployed, but you have found a new one. There will be some extra fees associated with this, but it allows you a longer time to catch-up, so you don’t end up further behind.

Forbearance

This is when your lender allows you to pay a lower payment or stop paying altogether for a period of time. Usually, this is something you can do if you’ve lost your job, suffered a disaster, or had a severe injury or illness. However, it does not mean that you don’t have to make up those payments. When the forbearance period expires, you will either need to make the payments you missed in one lump sum or create a repayment plan with your lender.

In the ideal world, you won’t ever end up behind on your mortgage or have to deal with a financial crisis. But this world isn’t ideal, so it is best to be aware of what you are options are so you can take immediate action if you need to.